Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Minyan Mailbag: Where Does GLD Get All That Gold?


No shortage in the yellow metal - yet.

Professor Lewis,

Specifically, from whom does the Gold ETF (GLD) purchase the physical commodity in such large quantities?

Minyan K

Dear Minyan K,

It's purchased on the London Bullion Market (just as you might buy a stock on the NYSE, though London is OTC and not a true "exchange" environment). GLD's vaults are also conveniently located in London.

The LBMA just reported this morning that gold ounces transferred between accounts held by bullion clearers rose 8%, to a daily average of 18.8 million ounces (533 tonnes) in January from a month earlier.

And for those who might not be aware, a "metric tonne of gold" is about a cubic foot. So it's not as large as one might think. In fact, all the gold in the world could be fit into a tennis court-sized cube. Hence, gold is very rare and very valuable.

There seems to be a misunderstanding (largely due to misinformation being spread by certain "Internet commentators") that there's a "shortage" of gold. There isn't - though there is a significant shortage of gold coins and small bars, but the larger bars can still easily be found, despite robust investor demand for the yellow metal.

When we see GOFO turn negative and indicate backwardation for a sustained period, then we'll know even the larger bars are difficult to find.

But we're not there yet.

Professor Lewis
Position in gold and gold stocks

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos